Spoken by Ministers
Tom Watson, The Parliamentary Under-Secretary of State for Defence
"I apologise unreservedly for this further error" 11 July 2006 (pt0129)
Tony Blair, Prime Minister
apologises for £30m tax mistake on Army pensions
Pensions (Taxation)
Hansard 8 June 1999 column 213
Pensions (Taxation)
Hansard 8 June 1999 column 213
Mr. Coaker:
To ask the Secretary of State for Defence if he will make a statement on progress made in discussions between his Department and the Inland Revenue regarding repayment of tax on pensions awarded prior to 31 March 1973 which have been reclassified. [85614]
Mr. Doug Henderson:
The MOD is working closely with the Inland Revenue on the repayment of tax for the 179 Army pensioners identified as having had tax incorrectly deducted from their invalidity pension. The affected pensioners will all receive a full refund of the tax wrongly paid since their discharge, together with a repayment supplement reflecting the interest which might have been accrued on the amount of tax wrongly paid. The repayment of tax is being processed in three stages: the first stage, the repayment of the current year's tax, has been completed; the second stage covers the period 1994-95 to 1997-98 for which records are held and repayments for this period will be made shortly. The final stage, which covers the period from the individual's discharge date to 1994, is more difficult to calculate as records of pension and tax paid are not held and therefore need to be recreated. This work is under-way and repayment will be made as soon as possible.
House of Commons debate 23 January 2002
Army Attributable Pensions
3.32 pm
The Parliamentary Under-Secretary of State for Defence (Dr. Lewis Moonie):
As Minister with responsibility for veterans affairs, Mr. Speaker, I have come to the House to offer a statement, both to clarify the matter of the taxation of attributable Army invaliding pensions and to give an apology.
Service personnel retiring on ill-health grounds are eligible for a war disablement pension from the War Pensions Agency if their illnesses or injuries are attributable to service. Since 1973, personnel have also been eligible for a service attributable pension under the armed forces pension scheme. Before 1973, pensions were paid early to those invalided out of service. Those pensions should be tax free when the injury is attributable to service.
Owing to an administrative error by the Army pensions office, following, I believe, a change of legislation in the early 1950s, a number of Army pensioners have had their attributable invaliding pension mistakenly taxed. This has therefore affected such attributable pensioners over a period of some 50 years. The error is deeply regrettable, as is the time that it took to identify it. We offer our unreserved apology to those pensioners who were affected and to the relatives of those who died before we were able to make restitution.
The error was recognised in 1998 as a result of the efforts of an Army pensioner, Major John Perry. Major Perry deserves to be commended, as it was his efforts and persistence that brought the error to light. It is unfortunate that his early complaints were not dealt with satisfactorily. He appealed, and when his case was brought to the attention of the central pensions policy branch at the Ministry of Defence, the error was recognised and the points at issue conceded in 1998. Ministers were made aware of the error in September 1998, and Parliament was informed of progress on rectifying the mistake on 8 June 1999 in answer to a parliamentary question tabled by my hon. Friend the Member for Gedling (Vernon Coaker).
The Government are not merely reacting to today's news. The issue has not arisen in the past couple of days. I am pleased to report that, since 1998, the Ministry of Defence has taken extensive measures to identify pensioners and their widows who might be affected and to ensure a refund from the Inland Revenue. That has included the manual trawling of the records of more than 20,000 pensioners and widows. Information has been provided to ex-service and war widows associations, which have been most helpful in advertising the mistake and the mechanism for applying for a refund.
From the same debate . . . . .
23 Jan 2002 : Column 894
When there is great public interest in an issue, it is incumbent on the Government to consider it carefully and provide amplification and clarification, especially when it is based on thin information. Many details were substantively inaccurate.
I can tell the hon. Gentleman that Major Perkins's benefits were reviewed as part of the exercise, but as the War Pensions Agency had not accepted his invaliding condition as attributable to service, no corrective action was required and his pension remained taxable. Following a successful appeal by Major Perkins, the agency accepted that his condition was attributable to service, but it did not backdate the assessment to the date of his retirement. It was effective only from 25 August 1999.
The degree of Major Perkins's disability was assessed at nil per cent., and notification of this award was received. That might sound complicated, but it is done in that way so that, if there is a change in his condition, the level of the award can be raised at a future date. Arrangements have been made for Major Perkins to receive a refund of tax paid since 25 August 1999, but that was not backdated to the date of his retirement. I am looking closely at this issue at present, and I can assure him and his Member of Parliament, the hon. Member for Ryedale (Mr. Greenway), that the matter will be dealt with as quickly as possible. (highlighted by the editor)
The numbers still to be found are difficult to quantify. We have looked at more than 20,000 records—about 23,000, I think—and found 1,000 people who were liable for a repayment. Of these, 182 came from the period before 1973—of whom 73 are widows—and 785 from the period since that date, of whom two are widows. Widows represent about 5 per cent. of all those whom we are considering, which leads me to wonder whether there are more widows among the records that we have not been able to access, probably owing to the people involved having died some time ago. If the hon. Gentleman had listened a bit more carefully to my statement, he would know that we have taken great care to publicise this provision through the War Widows Association. That publicity has gone to 50,000 war widows as a consequence, and I hope that they, in turn, will have talked to others about it.